櫻花集團 SAKURA GROUP

2

Established in 1978

Date of Listing：1992/07/16

Chairman ：Chang, Yung-Chieh

Paid-in Capital：NTD 2.21 billion

Production Base ： Taiwan - Daya main div.／Daya 2nd div.／Shenkang ／Wufeng China - Kunshan, Jiangsu／Shunde, Guangdong

Employees: 1,040 (Taiwan) / 3,200 (China)

Company Profile

Head Office

3

Investment Structure

43.19%

Taiwan Sakura http://www.sakura.com.tw/

Puda http://www.puda.com.tw/

Topax http://www.topax.com.tw/

100%

Sakura B.V.I.

Sakura Huanan

100%

Sakura Cayman

Sakura China http://www.sakura.com.cn/

100%

Sakura Shunde

Shareholding Ratio: 44.39%

100%

45%

100%

Capital： NTD 171mn

Capital： NTD 217mn

Capital： USD 17.15mn

Capital： RMB 320mn

Capital： NTD 2,211mn

Capital： USD 5.85mn

Capital： RMB 80mn

Capital： USD 21.8mn

55.61%

4

1978 「SAKURA」

established

SAKURA Milestones

1987 “free

examination of

water heater” as

the free

permanent

service

2008 got the agency of

SVAGO and Electrolux,

and stepped into the

multi-brand era

2010 started producing

and marketing the

“solar water heater”

1995 began to produce

kitchen cabinets

provided to

constructors

1980 “free oil filters with

a door-to- door

delivery” as the free

permanent service

1994 “SAKURA (China) Bath

and Kitchen Co., Ltd”

officially began the

production and sales

activities

1997 established the

franchising chain store,

“Sakura Kitchen Life

Store"

2009 SAKURA China

began to produce

kitchen

appliances

2014 Promoting the four

major upgrades, and

reshaping the

consumer’s

experience with us

2017 Sakura brand

imposed the ideal of

intelligent products

5

Business Concept

N P S a p p l i e d

compresensively

SAKURA CARE

24/7 service hotline

On-duty service all year

round

High-pressure leak test

Constant temperature and

moisture duration test

Ignition switch test

Withstand voltage test

D F S S / D F M E A

Meet the needs of

local consumers

Innovation

Q u a l i t y Ser vice

6

A value enterprise and the maximum of the value for consumers and shareholders.

Core Mission

Dividend Payout Strategy ROE、Dividend yield

7.9

12.8 13.3 12.3

17.0 17.7 18.8

4.9

6.9 6.1 6.5

9.0

7.1 7.3

4

8

12

16

20

2012 2013 2014 2015 2016 2017 2018

Capital Reduction

16.13 17.40 21.48 19.88 27.71 36.41 37.53

ROE

Dividend yield

• Future ROE Goal： 20%

Annual AVG Share Price

Dividend Payout Ratio

70% 69% 67% 70% 79% 80% 73%

1.02

1.75 1.97 1.89

2.75

3.29 3.65

0.7

1.2 1.3 1.3

2.5 2.6 2.65

0

1

2

3

4

2012 2013 2014 2015 2016 2017 2018

EPS

Cash dividend per share

The capital expenditure from 2019

to 2020 will be higher.

7

Brands

Bathroom Solution Water Heater/

Kitchen Appliance Kitchen Solution Imported

Kitchen Appliance

Authorized agent of Electrolux major appliance in Taiwan

8

Products

Kitchen Solution Water Heater/ Kitchen Appliance

Imported Kitchen Appliance Bathroom Solution

9

The Level of Brands

High-end

High- intermediate

Intermediate

Basic

Keep going up

Water Heater/ Kitchen Appliance Kitchen Solution

10

Channel Structure

Taiwan Sakura

Regional Agents

(9)

Brand store Store/Shop、 Hypermarket

Distributor、Sanitary

materials

Kitchenware factory

Special dealer Property

developer

End users

Regional Branches (kitchen solution、import department)

Brand store Distributor

Sanitary materials Special dealer

Kitchenware factory Store/Shop

Property developer Hypermarket

(102) (300) (700) (1500) (670) (300)

Direct Dealer

11

Global Market Network

ODM/OEM Hong Kong

Australia

USA

Brazil

Dominican Republic

OBM Hong Kong

Macau

USA

Canada

Vietnam

Myanmar

Philippine

Mexico

Peru

12

33%

19% 20%

12%

11%

5%

60%

25%

10%

4%

Channel

51%

18%

19%

6% 6%

Product

Sakura 86%

Topax 14%

Brand

Kitchen Solution 1.49 billion

Water Heater & Kitchen Appliance

3.58 billion

Total Sales Revenue: NT$ billion 5.99

Sales Breakdown of 2018

Export 0.57 billion

Import 0.25 billion

Distributor、 Sanitary materials

Store/shop、Hypermarket

Special dealer

Property developer

Brand store

Kitchenware factory

Water heaters

Gas stoves

Range hoods

Dish dryers

Others

Sales Revenue of WH & KA: NT$ billion 3.58

13

69%

31%

60%

25%

10%

4%

Kitchen Solution 1.49 billion

Water heater & Kitchen appliance

3.58 billion

Export 0.57 billion

Import 0.25 billion

Sales Breakdown of 2018

Channel

Property developer

Brand store

Sales Revenue of KS: NT$ billion 1.49 Total Sales Revenue: NT$ billion 5.99

14

Water Heater & Kitchen Appliance

1,200

1,300

1,400

1,500

1,600

2011 2012 2013 2014 2015 2016 2017 2018

Dual brands strategy

• Sakura：Increase profits by promoting high-end models and stabilize the market share.

• Topax： Increase market share, especially by low-priced kitchen appliances.

39% 42% 42% 43% 42% 44% 43% 44%

35% 38% 37% 37% 36% 37% 36% 37%

3.4% 4.5% 5.3% 5.9% 6.1% 6.6% 6.4% 6.8%

0%

10%

20%

30%

40%

50%

2011 2012 2013 2014 2015 2016 2017 2018

S+T Sakura Topax

Market share in Taiwan Taiwan overall market

Stable market

Market size 1.55m units

8.6 million households in Taiwan

Over 6 million homes use our products

(1000 units)

Household penetration: 73%

15

16L Intelligent Turbo Boost Water Heater NTD 23,900

10L RF Water Heater NTD 7,500

Gas Stove NTD 4,700

Intelligent Built-in Hob with Double Vertex Flames NTD 18,300

Slope-side Range Hood NTD 6,590

加倍水量

加倍舒暢

獨家專利環吸技術

3D Ring Suction DC motor Range Hood NTD 25,600

Innovative Products of Taiwan Sakura

16

509 491 497

516 498 504

490 488 508 508

467 495 495 495

398 377

343 339 322 320

293 288 292 278

251 251 247 243

110 114

154 178 176 184 197 201

216 230

215 244 248 252

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

S+T 55%

Others 45%

The market of Water Heater is about 495,000 units per year.

Assumedly, the digitals will surpass the traditional ones after 2021.

The market share of the digitals will be 60% in the future.

Water Heater

FY2013 FY2018

S+T 53%

Others 47%

FE 60% RF 50%

59% 58% 57% 54% 52% 50%

41% 42% 43% 46% 48% 50%

0%

20%

40%

60%

80%

2013 2014 2015 2016 2017 2018

Traditional Digital

Taiwan Sakura sales quantity

Overall market Market share (S+T) (1000 units)

RF+FE total

RF 54% (Traditional)

FE 46% (Digital)

17

50% 50% 40%

60%

Built-in hobs

Gas Stove

385 354

423 402

378

454 425

451 468 457 455 457 452 452

Building use

permit Building license

Used house

transfer

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Table gas stoves

Stable increase Up to 70% in the future

Market: 455,000 units per year

Inside:2013 Outside:2018

S+T 42% Others

58%

FY2013 FY2018

S+T

40% Others 60%

60% 58% 58% 60% 57% 55%

40% 42% 42% 40% 43%

45%

0%

20%

40%

60%

80%

2013 2014 2015 2016 2017 2018

Table Built-in

Taiwan Sakura sales quantity

Overall market Market share (S+T) (1000 units)

18

25%

75%

15%

85%

Rang Hood

Traditional Style

S+T 40% Others

60%

S+T

36% Others

64%

67 128

199 245

287 293 7,900

14,800

21,900 25,900

29,200 31,000

2013 2014 2015 2016 2017 2018

Taiwan Sakura BLDC Rang Hoods Sales

Amount (NT$mn)

Quantity (units)

Overall market Market share (S+T)

(1000 units)

Inside:2013 Outside:2018

385 354

423 402

378

454 425

451 468 457 455 457 452 452

Building use

permit Building license

Used house

transfer

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Market: 364,000 units per year

Stable increase of market share Up to 40% in the future

BLDC / European Style

FY2013 FY2018

19

372 420 441

503 525 555

28.0 28.8 28.8 23.6 22.5 22.9

0

200

400

600

2013 2014 2015 2016 2017 2018

T/O of KS Building Use Permit(K house)

Two strategies for future growth： Stable business increase in the channel of property developer; transition of retail

operation

Optimization of the production procedure to increase the gross margin ratio.

147 157 163 169

177 175 160

177

0

50

100

150

200

2011 2012 2013 2014 2015 2016 2017 2018

437

478 470

494

478

465

90 91 94

103 103 102

400

440

480

520

2013 2014 2015 2016 2017 2018

Net Revenue Brand store(1000 sets) (NT$ mn) (NT$ mn)

Kitchen Solution

Increasing benefits of the brand stores The future plan of 4th generation shop

Overall market about 160,000 sets

Constant sales increase of the KS

CAGR 49%

20

Store Exterior

Design Guidelines

(the first model shop began in 2018)

Value upgrade for constructors in 2019

Sakura: value upgrade of products

TLK: imported kitchen appliances

Sales target of 2019: NT$30 mn

Kitchen Solution_Retail module improvement

Exploring customer needs and letting customers participate in planning

The expansion mode of the 4th generation store in 2019

Growing sales

Increasing margin

21

Shenkang plant / Range hood (Spraying) Daya plant / Water heater & Gas stove Wufeng plant / Kitchen solution

Lack of space / Inefficient flow of processing

It’s difficult to install automatic production line with the present space.

Development Plan_Production Optimization

1. Renewal of machines 2. Install of software

2019~2022 Main Capital expenditure

22

Development Plan_Vietnam Market

2018/11 Representative office

Decision for the Vietnam market

12~15 months

39%

8% 6%

46%

Rinnai Sakura Paloma Others

Market share of Gas stove (H.C.M/Hanoi/Da Nang)

>200 brands

Modern channel Property developer

23

Development Plan_House Deco (on evaluation)

Furniture market size 80 billion

Deco market size 120 billion

System Furniture>50 billion

Barriers of System furniture industry

Product Interior design

Installation management

Market competition

Why Sakura Enter ?

Industry situation No leading Brand

Consumer not satisfied Consumers need 「multiple product / trusted brand/ after service」

O2O Enormous quantity of Sakura members and

the intensive network of brand stores

Resource Successful brand experience

/ financial resource

24

4,074 4,485

4,852 5,149

5,601 5,644 5,986

1,382

276 478 539 517 701 720 800

198

1.02

1.75 1.97 1.89

2.75

3.29

3.65

0.91

0

1

2

3

4

0

1,000

2,000

3,000

4,000

5,000

6,000

2012 2013 2014 2015 2016 2017 2018 2019Q1

Net Revenue Net Income EPS

Sakura Group

Key Financial Indicators

NTD mn NTD

YoY +2 %

YoY +11%

25

Sakura Group

Key Financial Indicators

NTD mn 2012 2013 2014 2015 2016 2017 2018 2019Q1

Net Revenue 4,074 4,485 4,852 5,149 5,601 5,644 5,986 1,382

Gross Profit 1,214 1,371 1,461 1,617 1,825 1,908 2,037 498

Gross Profit Margin 30% 31% 30% 31% 33% 34% 34% 36%

Operating Expenses 928 1,000 960 1,012 1,124 1,152 1,208 305

Operating Profit 286 371 501 606 701 756 756 192 Non-operation Income (Losses)

51 198 136 25 148 107 163 47

Profit Before Tax 337 570 637 631 849 863 993 240

Net Profit 276 478 539 517 701 720 800 198

EPS (NTD) 1.02 1.75 1.97 1.89 2.75 3.29 3.65 0.91

EBITDA 286 371 501 606 803 852 933 221 Profit (loss) from Sakura China

(10) 87 55 (69) 91 67 85 24

26

The market share of kitchen appliances keeps growing while the average retail price and margin are going up by selling more high-end products.

Kitchen Solution is expected to keep growing the market share for new houses and improve the operation efficiency of brand stores.

Expand new business & new market actively.

The investment in production will increase from 2019 to 2020.

Business Prospection

1

2

3

4

27

Sakura China

28

China Market of Water Heater & Kitchen Appliance

384 433

399 371

12.3% 12.7%

-7.9% -7.1%

2016 2017 2018 2019E

Range hood Retail TO YoY

609 668 672 675

11.9% 9.7%

0.5% 0.5%

2016 2017 2018 2019E

Water heater Retail TO YoY

236 264 245 231

9.8% 11.7%

-7.1% -5.7%

2016 2017 2018 2019E

Gas stove Retail TO YoY

Influenced by the "Real Estate control Strategy“, the growth rate

of the kitchen appliance market has glided considerably in 2018.

The business of water heater would remain flat in the next two

years. The market of range hood and gas stove would keep weak.

The "consumption upgrading" trend continues, and the mid-end

products will be the sales niche in the future.

The mainstream will be "replacement market" instead of "new

purchase market" in the future.

Gas heater 36%

Range hood 29%

Gas stove 16%

Elec heater 9%

Kitchen solution 6%

Others 4%

Sakura China Sales Breakdown by Product, 2018

29

Sakura China Overall Business Strategies

1

2

3

Continue to focus on the management in regional and the niche in the replacement markets.

E-commerce deployments / off-line distributor developments in 3-4 tier cities.

Managing Fixed costs / Enforcing Inventory management.

30

Target and key strategy for 2019

1. Sales of Middle –High product grows.

Sales share of 14L above rise to 46%.

2. The market share of gas water heater

from 1.4% to 1.8%.

43% 54%

3%

52% 45%

3%

0%

20%

40%

60%

80%

Gas Electric Others

2017 2018

Water heater market share

9%

Gas water heater is the

mainstream. Gas

Electric

18% 25%

57%

24% 34% 42%

0%

20%

40%

60%

80%

16L 13L,14L <12L

2017 2018

Gas water heater market share

9% 6%

Products of 13L and

above grows rapidly.

Gas(>14L)

Main product_Intelligent gas water heaters

55%

62% 66%

45%

38% 34%

17%

43% 46%

2015 2016 2017 2018 2019E

SC water heater sales share

31

Retailer 39.6%

Key Account

29.1%

EC 16.4%

Agent 8.3%

Others 6.6%

Sakura China

Agents

E-commerce ( EC )

Key Accounts

31 Branches

Retailers

34 Branches

8 Regional Centers

27 Regional Agents

Direct

Sales Breakdown by Channel, 2018

Property developer

Renovation

Main growing power

End users

Channel Structure

Dealer Direct

KA channel：

• Department store • Hypermarket store • National/regional

electric goods chain store

Retailer：

• Sakura Only • Boutique store • Cabinet store

32

E-commerce

20 50 87 109 132

177

0

50

100

150

200

2013 2014 2015 2016 2017 2018

Sakura China - Sales amount of EC

(RMB mn)

2013-2018 CAGR 54%

TMALL

45% JD京東

45%

Others

10%

Sales Breakdown by Customer, 2018

2019 growth target: 40%

2018 Sales YoY

TMALL 25%

JD 39%

Others 48%

Total 33%

EC main strategy

Signing up new area agents

The niche of replacement market in the cities of tier 1 & 2

33

1,161

1,359 1,439 1,430 1,458 1,416

1,312

311

(5) 42 29

(14) 48 33 42 12

(500)

0

500

1,000

1,500

2,000

2012 2013 2014 2015 2016 2017 2018 2019Q1

Net Revenue Net Income(RMB mn)

Sakura China

- Performance and Milestone

Withdrew from KM, and adjusted

the operation and products.

Channel rearrangement & new product development

Q4 Stock

Clearance

Q2 Price

Adjustment

34

THANK YOU!